Friday, May 7, 2010

Canadian Natural Resources (TSE:CNQ) Natural Gas Gamble

Canadian Natural Resources (TSE:CNQ) (NYSE:CNQ) is implementing a contrary strategy as their competitors are, as they're going to spend about $960 million to acquire natural gas properties, rather than shore up on oil assets, which most energy companies with a large exposure to natural gas have been doing.

The company believes the price of natural gas will eventually rebound, where they will at that time reap the benefits of their acquisitions.

This is risky, as huge amounts of natural gas are available, and unless that changes, it's hard to understand what CNR thinks will happen to change the supply/demand equation.

Even if demand goes up, which is easily could, there is so much natural gas available that it's highly unlikely prices would skyrocket as a result.

The enormous amount of shale gas reserves in the U.S. make supply a major factor in any of these decisions. This could be a big mistake by Canadian Natural Resources, but over the long term anything could happen, but I don't see it at this time.